Euro US Dollar (EUR/USD) Weakens as Safe-Haven Flows Dominate
(Updated 14/8/23, 16:45)
The Euro US Dollar (EUR/USD) exchange rate is slipping this afternoon as concerns mount over global growth prospects in the wake of China’s stumbling property sector soured market moods further. Continuing economic challenges in China appear to be spooking the markets and the safe-haven US Dollar (USD) is strengthening.
At time of writing, the EUR/USD exchange rate is around $1.0922, a 0.22% drop from this morning’s opening levels.
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EUR/USD Fluctuates on Global Growth Concerns
The Euro US Dollar (EUR/USD) exchange rate is trading narrowly as fears of global economic slowdowns linger.
At time of writing, the EUR/USD exchange rate is around $1.0948, relatively unchanged from this morning’s opening levels.
US Dollar (USD) Supported by Safe-Haven Flows
The US Dollar is finding modest support this morning amid a lack of economic data. Expectations of the Federal Reserve pausing their aggressive monetary policy appear to be offset by mounting fears of a global slowdown. A lack of economic data is leaving the market mulling over global economic growth prospects.
With US core inflation falling as expected, inflationary pressures appear to be easing. Further denting the ‘Greenback’ were Fed policymakers appearing dovish in their speeches, hinting that the current hiking cycle is coming to an end. The market has now priced in just an 11% probability of another hike in September.
However, preventing further losses, is the cautious market mood. Fears over China’s stumbling post-Covid recovery took another turn for the worse as it was reported that the country’s crucial property market is stuttering. County Garden, one of China’s biggest real estate companies reported a $7.6bn loss in the first half of this year. Economists are concerned that the crisis could spill over to the wider property and financial markets and further delay the recovery.
Euro (EUR) Quiet amid Lack of Economic Data
Meanwhile, the Euro (EUR) continues to trade fairly listlessly as a thin trading calendar is leaving the single currency to trade on wavering market sentiment.
However, the Euro appears to be modestly supported by further interest rate hike expectations. The market probability of the European Central Bank (ECB) to increase the cash rate at the next meeting in September is hovering around 42%.
Elsewhere, concerns over Europe’s biggest economy in Germany could also be weighing on the Euro. The German Economy Ministry warned that current indicators do not point to a sustainable economic recovery. But also added:
‘On the domestic front, the expected cautious recovery in private consumption, services and investment is showing the first signs of hope, which are likely to strengthen as the year progresses.’
Euro US Dollar Exchange Rate Forecast: Slipping Economic Sentiment to Dent the Euro?
Looking ahead, the Euro US Dollar exchange rate could see further movement with the latest economic sentiment index. Both the Eurozone and Germany surveys will be released. Another slump in confidence could weigh on the Euro as the Eurozone continues to battle inflation and soaring borrowing costs.
Meanwhile, the latest retail sales in the US could boost the ‘Greenback’ if forecasts prove accurate. A predicted 0.4% jump in sales, following a 0.2% climb the previous month, could show how resilient the US economy is.